Kaufman & Broad SA: H1 2020 RESULTS
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Kaufman & Broad SA
Press release
Paris, July 9, 2020 H1 2020 Results
As regards the market, there was a sharp drop in supply due to delays in processing building permits on account of the municipal elections in France, further compounded by the postponement of the second round. We can therefore expect a drop in orders in 2020, with a corresponding impact on new construction projects in 2021. For fiscal 2020 as a whole, we are looking for revenue of around €1 billion, EBIT close to 6% and virtually no net debt. For 2021, the backlog at end-May 2020 allows us to forecast revenue growth of around 30%. This increase would be significantly higher should the A7-A8 Austerlitz project get full green light in 2021. This outlook is based on a stabilization of the health situation. "
In H1 2020, in value terms housing orders totaled €872.0m (incl. VAT), a 7.9% increase compared with H1 2019. In volume terms, 3,635 units were ordered, a 13% decrease compared with the same period in 2019. Breakdown of the customer base Over H1 2020 as a whole, buyers' orders in value terms (incl. VAT) fell by 47% (first-time buyers) and 53% (second-time buyers) and accounted for 11% of sales compared with 24% in the first half of 2019. Orders from investors accounted for 22% of sales (19% for the Pinel Scheme alone), down 29% from one half-year to the next. Block sales made up 67% of housing orders, i.e. €581.1m. They rose by 69% compared with H1 2019, when they represented 43% of orders. Take-up period and sales offer The take-up period for programs was 3.1 months in the first half of 2020, down from 5.1 months in H1 2019. The commercial supply, 98% of which is located in high-demand, low-supply areas (A, Abis and B1), amounted to 1,850 housing units at the end of May 2020 (3,484 housing units at the end of May 2019, i.e. 97% in high-demand, low-supply areas).
In H1 2020, the Commercial Property segment recorded net orders of €1,079.9m (incl. VAT). A sale before completion (VEFA) was signed on 19 June on the c.10,000 sq.m Blue Bird office building in Montrouge with GCI/Crédit Suisse. Meanwhile, the public consultation on the A7-A8 Austerlitz project (about 92,000 sq.m in offices, retail and hotel) began on June 29. Kaufman et Broad currently has around 150,000 sq.m in office space and around 75,000 sq.m in logistics space under marketing or under study. It is currently building nearly 73,000 sq.m in office space and more than 36,000 sq.m in logistics space. Lastly, it has around 120,000 sq.m of office space to be finalized. At the end of May 2020, the commercial backlog amounted to €1,324.5m.
On May 31, 2020, the housing backlog amounted to €2,464.2m (excl. VAT), i.e. 27.1 months of business. At the same date, Kaufman and Broad had 156 housing programs on the market, representing 1,881 housing units (compared with 200 programs representing 3,575 housing units at the end of May 2019). The Group's total backlog amounts to nearly €3.8bn, of which 36.5% of the revenue still to be recognized is based on land already acquired. Of the remainder to be acquired, 56.3% is related to projects for which a building permit has either been filed, obtained or under review and so being cleared. Finally, within the share of projects for which the permit has only been filed, the Commercial operations of Austerlitz A7/A8 and Galion Puteaux alone represent nearly 30% of the Group's total backlog as of May 31, 2020. The Housing property portfolio represents 34,864 units. It is up 8.6% compared with the end of May 2019, corresponding to potential revenue of around four years of business.
Overall revenues totaled €385.0m (excl. VAT), down 45.3% compared to H1 2019, mainly due to the sharp contraction in general business for two months, from mid-March to mid-May. Revenue from Housing amounted to €352.3m (excl. VAT), versus €610.9m (excl. VAT) in H1 2019. This represents 91.5% of group revenue. Revenue from Apartments was down by 43.7% compared to H1 2019 and stood at €319.1m (excl. VAT). Revenue from Single-family homes in communities amounted to €33.2m (excl. VAT), versus €44.3m (excl. VAT) in H1 2019. Revenue from Commercial Property amounted to €30.0m (excl. VAT), compared with €89.8m (excl. VAT) in H1 2019.
Gross margin for H1 2020 amounted to €73.5m, compared with €140.7m in H1 2019. Current operating expenses amounted to €61.2m (15.9% of revenue), versus €70.9m in H1 2019 (10.1% of revenue). Current operating income stood at €12.3m, versus €69.8m in H1 2019. The current operating margin ratio was 3.2%, compared with 9.9% in H1 2019. Attributable net income for H1 2020 was €2.1m (compared with €39.3m in H1 2019).
During the Covid-19 pandemic, most of the Group's construction sites were totally or partially shut down, and sales activity slowed dramatically. This had a significant negative impact on the Group's financial position, with virtually no cash inflows during this period, even though settlement of work carried out in Q1 became due. Kaufman & Broad did not request deferral or suspension of payment of its tax and social security charges or apply for the government-backed bank loans introduced as one of the measures to support the economy. In March 2020, as a precaution, the group drew down €150 million of the €250 million available under the revolving credit facility set up in January 2019, in order to further strengthen its sound cash position and ensure funding for its general needs during the current situation. This amount is repayable over periods of one, three and six months. Net financial debt was €78.6m on May 31, 2020 (excluding the effect of lease obligations under IFRS 16), compared with net cash of €56.0m at end 2019 and €54.6m on May 31, 2019. Net financial debt to May 31, 2020 takes into account a residual drawdown of €118.0m on the "RCF" line to address deterioration of the balance sheet caused by the pandemic. Cash assets (available cash and investment securities) amounted to €194.4m, compared with €208.1m as of November 30, 2019. The group's financing capacity was €326.4m (€458.1m as of November 30, 2019). The working capital requirement amounted to €245.4m (21.3% of revenue, over 12 consecutive months), compared with €150.1m as of November 30, 2019 (10.2% of revenue); restated for the 2019 dividend paid on June 10, 2020, it would have been €283.4m, i.e. 24.6% of revenue.
On June 10, 2020, Kaufman & Broad paid a dividend of €1.75 per share for the year ended November 30, 2019. The total cash dividend paid to shareholders amounted to €38.0m.
With respect to the outlook for 2020, Kaufman & Broad forecasts full-year sales of about €1bn, an EBIT ratio of about +6% and net financial debt close to zero. These prospects are based on a return to a normal level of productivity for the sites, which have fully restarted at May 31, 2020, on the assumption of a stabilization of the health situation, without a new period of containment, and without significant social movements, which could have an unfavorable impact on the progress of work on construction sites. For 2021, the backlog at end-May 2020 allows us to forecast revenue growth of around 30%. This increase would be significantly higher should the A7-A8 Austerlitz project get full green light in 2021. This press release is available at www.kaufmanbroad.fr
About Kaufman & Broad - Kaufman & Broad has been designing, developing, building, and selling single-family homes in communities, apartments, and offices on behalf of third parties for more than 50 years. Kaufman & Broad is one of the leading French builder-developers due to the combination of its size and profitability, and the strength of its brand. Certain information included in this press release is not historical data but is forward-looking statements. These forward-looking statements are based on estimates, forecasts and assumptions, including, in particular, assumptions concerning Kaufman & Broad's current and future strategy and the economic environment in which Kaufman & Broad operates, which is significantly impacted by the current health crisis. These forward-looking statements are only valid on the date of this press release. Actual results could differ materially from those expressed or implied by these forward-looking statements. Forward-looking statements and information are not guarantees of future performance and are subject to risks and uncertainties that are difficult to predict and generally beyond the control of Kaufman & Broad. In addition to the current health crisis, these risks and uncertainties include those detailed and identified in Chapter 1.2 "Risk Factors" of the Kaufman & Broad 2019 Universal Registration Document filed with the French Financial Markets Authority (AMF) on March 31, 2020 under number D.20-0231, available on the Company's website. (www.kaufmanbroad.fr) and that of the AMF (www.amf-france.org). This press release includes only summarized information and does not purport to be complete. Backlog: a summary that, at any given moment, makes it possible to estimate revenue for the coming months. EBIT: corresponds to current operating income, i.e. gross margin less current operating expenses. EHU: the EHUs (Equivalent Housing Units) are a direct reflection of business volumes. The number of EHUs is a function of multiplying (i) the number of housing units of a given program for which notarized sales deeds have been signed by (ii) the ratio between the group's property expenses and construction expenses incurred on said program and the total expense budget for said program. Gross margin: revenue less cost of sales. The cost of sales is made up of the price of land and any related costs plus the cost of construction. Financing capacity: corresponds to cash assets plus lines of credit not yet drawn Lease-before-completion (BEFA): a lease-before-completion involves a customer leasing a building before it is built or redeveloped. Orders: measured in volume (Units) and in value terms; orders reflect the Group's sales activity. Orders are recognized in revenue based on the time necessary for the "conversion" of an order into a signed and notarized deed, which is the point at which income is generated. In addition, in the case of multi-occupancy housing programs that include mixed-use buildings (apartments, business premises, retail space, and offices), all of the floor space is converted into housing unit equivalents. Property portfolio: represents all of the land for which any commitment (contract for sale, etc.) has been signed. Property supply: it is represented by the total inventory of properties available for sale as of the date in question, i.e. all unordered housing units as of this date (minus the programs that have not entered the marketing phase). Sale-before-completion (VEFA): Sale before completion is a contract whereby the seller immediately transfers to the buyer its land rights and ownership of existing buildings. The future structures will become the purchaser's property as they are completed: the purchaser is required to pay the price of these structures as the works progress. The seller retains the powers of the Project Owner until the acceptance of the work. Take-up period: The inventory take-up period is the number of months required for the available housing units to be sold if sales are maintained at the same pace as in previous months, i.e., housing units outstanding (offer available) per quarter divided by the number of orders per quarter ended and with orders in turn divided by three. Take-up rate: The take-up rate represents the percentage of the initial inventory for a property program that is sold on a monthly basis (sales per month divided by the initial inventory), i.e., net monthly orders divided by the ratio between the opening inventory and the closing inventory, divided by two. Units: units are used to define the number of housing units or equivalent housing units (for mixed programs) in a given program. The number of equivalent housing units is calculated as a ratio between the surface area by type (business premises, retail space, or offices) and the average surface area of the housing units previously obtained. NOTES
Key consolidated data
** Based on the number of shares that make up Kaufman & Broad SA's share capital, i.e. 21,864,074 shares at Friday, May 31, 2019 and 22,088,023 shares at May 31, 2020. Consolidated income statement*
* Restatement following the end of the capitalization of financing costs following the change in interpretation of the IAS 23 standard and a reclassification of the CVAE expense from the operating expenses item to the income tax item. Consolidated balance sheet*
** Restatement following the end of the capitalization of financing costs following the change in interpretation of the IAS 23 standard and a reclassification of the CVAE expense from the operating expenses item to the income tax item. Operational data
Regulatory filing PDF file File: PDF UK |
1090697 09-Jul-2020 CET/CEST
Kaufman & Broad S.A. Stock
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